CHF: EURCHF Weakness Resumes, Back Below 0.9125
Feb-12 10:47
- Swiss Franc resilience has resumed today, with EURCHF seeing a renewed push back below 0.9125 in recent trade, narrowing the gap to Tuesday’s cycle lows at 0.9095. The overall bearish dollar narrative is also weighing notably on USDCHF today, which edges closer to cycle lows, located 0.7605.
- Markets will await inflation data from both Switzerland and the US on Friday. The Swiss reading will be interesting on the back of the annual January services repricing in a larger cluster of categories. The next SNB meeting is not scheduled until March 19.
- UBS have recently flagged that "asset managers are buying CHF at the fastest pace in a decade", one factor leading to their call for USDCHF reaching 0.75 at the end of Q1, and "consistent with deeper EURCHF downside towards 0.90 by year-end and beyond".
- Danske meanwhile think “the bar is relatively high for the SNB to intervene [...] also note the shift taking place in safe-haven dynamics the past year which has favoured a stronger CHF [...] stick to our call of being bullish CHF FX."
- As a reminder, Morgan Stanley also put out a bullish franc call earlier this week, targeting a move for EURCHF to 0.8700. They highlighted that inflation dynamics differ from 2020 and reduce the case for SNB level defence.
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BOE: ILTR usage net increase GBP1.892bln
Jan-13 10:47
- ILTR gross takeup was GBP3.727bln (the highest since 4 November) with net takeup GBP1.892bln (the highest since 11 November).
- An increase in usage this week was probably expected to some extent given the APF sales operation yesterday, but that will have only reduced reserves by around GBP0.9bln, so this is still higher usage than we expected.
- Total ILTR usage was already at a record high last week and now stands at a new record of GBP64.633bln.
- We will be watching Friday's STR operation to see if there is any corresponding reduction there to partly offset this increase.
EGB SYNDICATION: France 20-year May-46 OAT mandate
Jan-13 10:42
"The REPUBLIC OF FRANCE has mandated BNP PARIBAS, CITI, HSBC, J.P. MORGAN and SOCIETE GENERALE to act as Joint Lead Managers on an upcoming new 20 year OAT benchmark, due 25 May 2046.
The transaction will be launched by syndication in the near future, subject to market conditions."
From market source
- We had flagged the potential for the French syndication this week but we had thought the W/C 26 January was more likely.
- We pencil in an E8-10bln transaction size tomorrow.
GILTS: Yields Off Session Highs, Bullish Technical Control Intact
Jan-13 10:38
UK paper is a little softer after weakness in JGBs provided a cheapening theme in wider core global FI markets through the Asia-London handover. Another heavy day of EUR supply is also noted.
- Futures -11 at 92.42. Bulls remain in technical control with the contract in the upper end of the recent range after breaking several key resistance levels. Resistance is layered in at 92.62/72/91, while initial support comes in at the Jan 8 base (91.84).
- Yields 0.5-1.5bp higher across the curve, 10s below 4.40%, but the ’25 low (4.363%) remains untested.
- Japanese BoP data for November revealed that Japanese investors generated the largest round of monthly net selling of UK paper since September ‘11. A reminder that the Budget was released at the end of November, with concerns around the UK fiscal situation acting as a potential trigger for the Japanese sales in the run up to that event.
- BoE’s Governor Bailey spoke this morning (09:00 London).
- The text from his appearance will be published on Friday. It seems unlikely there will be anything regarding near-term monetary policy in the speech given the delay between the speech being delivered and the text being released.
- Elsewhere, the latest round of BRC retail sales data pointed to ongoing consumer caution.
- The GBP900mln 1.125% Sep-35 I/L auction generated strong demand (cover of ~4.8x, with very firm pricing).
- SONIA futures flat to -2.0, with SFIZ6 2.5 off yesterday’s cycle high. 44.5bp of BoE easing priced through year-end, with the next cut not quite fully discounted until the end of the June meeting.
- Looking ahead, the impending U.S. CPI release is set to dominate today.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Feb-26 | 3.715 | -1.0 |
Mar-26 | 3.627 | -9.7 |
Apr-26 | 3.508 | -21.7 |
Jun-26 | 3.439 | -28.5 |
Jul-26 | 3.361 | -36.4 |
Sep-26 | 3.324 | -40.0 |
Nov-26 | 3.290 | -43.5 |
Dec-26 | 3.280 | -44.5 |
